What Scenario Are You Ready For?

One guarantee in business is change. Change happens all around us: industry trends, regulatory changes, competitive actions, consolidation and new entrants into a category, just to name a few. But within all this turmoil, companies still need to develop a strategic plan that aligns with their core purpose and enables the achievement of their long- and short-term business goals.

The most successful companies embrace this inevitable change, because in change comes opportunity. They are prepared to leverage it, because they have already done the hard work to develop a scenario plan for the different possible change factors, whether good or bad. Like my father always told me: Prior planning prevents poor performance. Over the years, I’ve adapted the saying with a positive twist so it speaks to companies that outperform their competition: Prior planning provides peerless performance. In our Scenario Planning Workshop, we turn that mantra into action, helping our clients plan ahead for whatever changes may come their way.

Planned actions are just the beginning

Every year, companies develop their new business goals. Business goals are usually focused on volume and share growth or some type of profit improvement. Whether it’s a 5% market share gain, 10% growth from new product introductions, 20% overall growth rate, 5% productivity plan, or obtaining a 7% price increase, all these actions will invariably cause some level of market reaction.

Sir Isaac Newton's third law of physics states that “for every action there is an equal and opposite re-action.” It is also true in business that all actions create some type of market reaction.

Hypothetically, the scenarios that are the easiest to plan for are those actions you proactively prepare to take as a company. So, let’s say you plan to take 5% share in a certain segment of the market. It’s fine for your team to sit around your conference table to plan and commit to that goal, including it in your upcoming PowerPoint presentation to leadership. Where most companies fall short is that they do not plan for the industry and competitive reactions that arise from these planned actions. It is imperative to take time to explore the different potential reactions that may present themselves and define how you may either optimize your planned actions, or at least prepare for the reactions that may come from the market.

Planning for the unplanned

While there are situations you plan for, invariably things will occur that are unplanned. Some are good, but many have potential negative business repercussions. You need to prepare for the unexpected events, such as the loss of half your big box store placement, consolidation of distributors where you lose (or gain) 20% share, product failure/out of spec, or an unexpected plant shutdown (yours or your competition’s). These events can come in many forms and can happen at any time. Most outperforming companies seem to have more control of these situations. One common theme among them is that they usually have pre-planned contingency plans already in place for different types of unplanned events.

How well do you know your competition?

Scenario planning is, by definition, a pre-planning process. It is a method used to make long- and short-term, highly informed decisions. It is an adaptation of war theory used by military intelligence. Some call it war games. Sun Tzu, the most famous General in Asian history and author of The Art of War, is quoted as saying, “The general who wins a battle makes many calculations in his temple ere (before) the battle is fought. The general who loses a battle makes but few calculations beforehand. Thus, do many calculations to lead to victory.”

The best chance to defeat your competition is to deeply understand them, their leadership, their assets and what actions they will most likely take and why they will take them. This is at the heart of The Art of War theory. Most companies today know only the basics about their competition, but the more you know, the more confidently you will be able to create plans that will have the best chance of success in the market.

Know your competition deeply

Scenario planning requires having deep knowledge about the market — its trends, triggers and forecasts — as well as your competition, be they current or potential new entrants. In Interrupt’s Scenario Planning Workshops, we work with manufacturers to develop comprehensive briefing books that define the competition in a much deeper fashion than merely identifying their market share and capacity capabilities. We delve into each channel, their share, profitability, resource allocation and tendencies to name a few. We also research one major signal of their competitive intent — their senior leadership. Every leader has tendencies in how they think and lead. It is important to review their past decision tendencies, both at their current company and previous ones, to better understand how they lead organizations and make business decisions, which can be predictive of their future tendencies.

A team strengthening process

The scenario planning process also has tremendous value in educating and developing your team — and your long-term strategy. The planning process should bring a diverse team together to play the role of each of your competitors AND your company. Each individual team should be comprised of 4-6 members with a blend of sales, product, operations, marketing and management. Each team is given a specific company to play, and is given a comprehensive briefing book of information that explains their selected company’s business overview, tendencies, resources, business strategies and goals.

Once the teams are up to speed, different scenarios will be presented and each team will develop actions plans to address each scenario based upon the information provided in their briefing book. Ample time must be spent up front to prepare for the session and develop the briefing books. The planning session itself usually lasts one to one-and-a-half days depending on the number of scenarios you will be addressing.

Building a better base of knowledge

While scenario planning will help you with this year’s strategic planning process, the real value is the additive results of doing this type of planning each year. The process forces you and your team to capture unique industry and competitive knowledge. This continual flow of information will help you build a strong platform of knowledge and tendencies. You are also building institutional knowledge —educating your internal team on the importance of getting outside your conference rooms with the expectations of thinking strategically with deeper information, and in making more purposeful decisions.

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Poor or non-existent scenario planning is one of the top three failures of the strategic planning process. Strong performing companies control their own destiny by investing resources and time in market intelligence, the scenario planning process and the determination to step outside of the internal-centric planning process.

Sun Tzu said it best in the end of his book, “If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”

If you want help outperforming your competition and creating a more sustainable strategic plan, let our Strategy & Insights Team help you facilitate a custom Scenario Planning Workshop for your business, let's talk.

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